Samia Nakhoul/Reuters
Forbes.com
January 13, 2004

Abu Dhabi: Iraq’s finance minister on Tuesday urged countries to which Iraq owes billions of dollars to write down or even write off the debt to allow the country to recover from three wars and three decades of dictatorship.

“We urge countries to write off or reduce the debt significantly to ease off the burden so as to give Iraq a chance to rebuild and grow,” Kamel al-Keylani told Reuters in an interview in the United Arab Emirates’ capital Abu Dhabi.

“We want to see a real willingness by all countries to help Iraq. Iraq is a rich country . . . there should be no fear for countries to reduce the debt or reschedule it,” added Keylani, a minister in Iraq’s U.S.-appointed Governing Council.

He was speaking before an expected visit to the Gulf region by U.S. presidential envoy James Baker to negotiate with Iraq’s creditors big reductions of the foreign debt, estimated by the Internatonal Monetary Fund (IMF) at around $120 billion.

“We are facing many obstacles and the debt is the first one. We didn’t start from zero but below zero,” Keylani said.

Baker has already secured pledges from major European and Asian creditors, such a Germany, France and Japan, to reduce Iraq’s crippling debt.

His objective is to get similar support from Gulf countries to which Iraq owes more than $45 billion – largely money given to finance Saddam Hussein’s 1980-88 war with neighbouring Iran.

Baker is due to visit Saudi Arabia and other Gulf countries for talks with government officials this month.

Analysts say Gulf heavyweight Saudi Arabia, which has staked a claim against Baghdad for $30 billion, is key to finding a deal to ease off Iraq’s debt and support economic recovery after the U.S. overthrow of Saddam in April.

Saudi Arabia has claimed $24 billion in cash and an additional $6.7 billion in oil support, incurred mostly during Saddam’s war with Iran. Iraq insists the money from Saudi Arabia and other Gulf states was given as grants.

Saudi Foreign Minister Prince Saud al-Faisal has said his country would not discuss any loan write-offs with Iraq’s interim cabinet and would wait until Iraq had an independent government.

Coalition forces are set to transfer power to an independent Iraqi government by July 2004.

Return of assets under negotiation

Keylani also said that his interim government is negotiating with Lebanon, Jordan and Syria for the return of assets Saddam’s government held in their banks.

“There are still technical talks to be completed, documents to be presented and legal procedures to be adopted, we are going to arrive at the final figures,” Keylani added.

Iraq stashed away billions of dollars from 1990-2003 in cash from oil deals with foreign firms in contravention of U.N. sanctions in Lebanese, Syrian and Jordanian banks, bankers said.

Keylani said Tunisia and Bahrain were among the first Arab states to free Iraqi assets. He did not give figures for assets in Syria but estimated that Lebanon and Jordan held $1 billion.

He said favourable world oil prices would leave Iraq on target for its $13 billion budget for 2004, which assumes average oil exports of 1.6 million barrels a day at $21, unless Baghdad faces pumping problems.

“If we have any pumping problems we have alternative solutions such as customs tax as well as reducing spending.”

He said the IMF advised Iraq on measures it needed to take to raise revenues such as imposing custom duties and taxes.

Reforming Iraqi banks, which for decades followed a command economy and lagged behind in technical expertise, was a priority to make them conform to international regulations, he said.